July 11 (Bloomberg) -- The 18-month U.S. recession that
ended in June 2009 has so far cut spending by more than $7,300
per person, or about $175 a month, from the pace that prevailed
during the housing boom, said a Federal Reserve Bank of San
Francisco researcher.

The $7,300 figure reflects the period from December 2007 to
May 2011, and was calculated by comparing the inflation-adjusted
path of consumer purchases to pre-crisis levels, senior
economist Kevin Lansing wrote in a paper released today. Per-capita consumption is still 1.6 percent below its pre-recession
peak, 42 months after the recession started, he said.

“The purpose of the paper was to give an idea of how much
stimulus was coming from the housing bubble,” Lansing said in a
phone interview. “People are wondering why consumer spending is
so slow these days. What they should be asking is: Why was it so
strong in previous years? You’re comparing it to an artificial
economy that was driven by debt.”

“We’re not going back to that kind of spending growth
unless we have a big run-up in housing prices again, or a change
in labor markets that makes people’s income go up,” Lansing
said in the interview.

Fed officials are attempting to avert a repeat of the
crisis that began with the collapse of the subprime-mortgage
market. Their efforts to stimulate the world’s largest economy
have yet to help lower an unemployment rate that’s remained
around 9 percent for more than two years.

Home Prices

Home prices in the U.S. climbed 63 percent from the last
three months of 2001 until reaching a record in the second
quarter of 2006, according to figures from S&P/Case-Shiller.
Since then, values have dropped 34 percent through the first
quarter of this year.

It would cost the government $2.3 trillion to replace that
lost consumption, said Lansing, who expects to see a “slow,
sluggish recovery” even after the Fed and federal government’s
stimulus efforts. “Households have too much debt” and efforts
to spur consumer spending by encouraging borrowing won’t be
effective, he said.

It’s taking longer to rebound to pre-crisis levels than
after the 1990-1991 downturn, when per-person consumption
climbed back to a pre-recession peak in 23 months, according to
Lansing. By comparison, the 2001 recession departed from the
typical pattern, by producing a rise in real consumption that
was supported by low long-term rates and the Fed’s easy monetary
policy, he said.

The researcher attributed the drop in consumption this time
to declines in household net worth, increases in savings and
reduction in lending that fueled past spending. In addition,
real consumption has recovered slowly because the population has
grown less than 1 percent per year, he said.

“Consumption was bound to slow sooner or later,” the
economist said in the paper. “The amount of foregone
consumption might be viewed as a measure of the recession’s cost
for the average person. However, the pre-recession consumption
trend was almost surely not sustainable.”